SEC Filing | International Money Express

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imxi-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-37986


INTERNATIONAL MONEY EXPRESS, INC.
(Exact name of registrant as specified in its charter)


Delaware						47-4219082
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

9480 South Dixie Highway Miami, Florida						33156
(Address of Principal Executive Offices)						(Zip Code)


(305) 671-8000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock ($0.0001 par value)	IMXI	Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


☐	Large accelerated filer	☒	Accelerated filer
☐	Non-accelerated filer	☐	Smaller reporting company
		☒	Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

As of November 3, 2022, there were 37,062,438 shares of the registrant’s common stock, $0.0001 par value per share, outstanding. The registrant has no other class of common stock outstanding.

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INTERNATIONAL MONEY EXPRESS, INC.

INDEX TO FINANCIAL STATEMENTS


		Page

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		3

PART 1 - FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	4

	Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	4

	Condensed Consolidated Statements of Income and Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and 2021	5

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021	6

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021	8

	Notes to Condensed Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	40

Item 4.	Controls and Procedures	42

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	43

Item 1A.	Risk Factors	43

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43

Item 3.	Defaults Upon Senior Securities	43

Item 4.	Mine Safety Disclosures	43

Item 5.	Other Information	43

Item 6.	Exhibits	44

SIGNATURES		45

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q may contain certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act, as amended, which reflect our current views with respect to certain events that are not historical facts but could have an effect on our future performance, including but without limitation, statements regarding our plans, objectives, financial performance, business strategies, projected results of operations, and expectations for the business of the Company.

These statements may include and be identified by words or phrases such as, without limitation, “would,” “will,” “should,” “expects,” “believes,” “anticipates,” “continues,” “could,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “forecasts,” “intends,” “assumes,” “estimates,” “approximately,” “shall,” “our planning assumptions,” “future outlook,” “currently,” “target,” “guidance,” and similar expressions (including the negative and plural forms of such words and phrases). These forward-looking statements are based largely on information currently available to our management and on our current expectations, assumptions, plans, estimates, judgments, projections about our business and our industry, and macroeconomic conditions, and are subject to various risks, uncertainties, estimates, contingencies and other factors, many of which are outside our control, that could cause actual results to differ materially from those expected or implied by such forward-looking statements and could materially adversely affect our business, financial condition, results of operation, cash flows and liquidity. Factors that could cause or contribute to such differences include, but are not limited to, the following:

•changes in applicable laws or regulations;

•factors relating to our business, operations and financial performance, including:

◦our ability to successfully execute, manage, integrate and obtain the anticipated financial benefits of key acquisitions and mergers, including the acquisition of Envios de Valores La Nacional Corp. and LAN Holdings, Corp.;

◦economic factors such as inflation, the level of economic activity and labor market conditions, as well as rising interest rates;

◦public health conditions, responses thereto and the economic and market effects thereof;

◦competition in the markets in which we operate;

◦volatility in foreign exchange rates that could affect the volume of consumer remittance activity and/or affect our foreign exchange related gains and losses;

◦our ability to maintain favorable agent relationships;

◦credit risks from our agents and the financial institutions with which we do business;

◦bank failures, sustained financial illiquidity, or financial institution illiquidity;

◦new technology or competitors, such as digital platforms;

◦cyber-attacks or disruptions to our information technology, computer network systems, data centers and phone apps;

◦our ability to satisfy our debt obligations and remain in compliance with our credit facility requirements;

◦our success in developing and introducing new products, services and infrastructure;

◦consumer confidence in our brand and in consumer money transfers generally;

◦our ability to maintain compliance with applicable regulatory requirements;

◦international political factors, political stability, tariffs, border taxes or restrictions on remittances or transfers;

◦currency restrictions and volatility in countries in which we operate or plan to operate;

◦consumer fraud and other risks relating to the authenticity of customers’ orders;

◦changes in immigration laws and their enforcement;

◦our ability to protect intellectual property rights;

◦our ability to recruit and retain key personnel; and

•other economic, business and/or competitive factors, risks and uncertainties, including those described in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections in our Annual Report on Form 10-K for the year ended December 31, 2021.

All forward-looking statements that are made or attributable to us are expressly qualified in their entirety by this cautionary notice. The forward-looking statements included herein are only made as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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PART 1 – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INTERNATIONAL MONEY EXPRESS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for share data)


	September 30, 2022		December 31, 2021
ASSETS	(unaudited)
Current assets:
Cash	$	105,052	$	132,474
Accounts receivable, net	100,061		67,317
Prepaid wires, net	104,114		56,766
Prepaid expenses and other current assets	8,906		6,988
Total current assets	318,133		263,545

Property and equipment, net	22,614		17,905
Goodwill	36,260		36,260
Intangible assets, net	12,599		15,392
Other assets	9,295		7,434
Total assets	$	398,901	$	340,536

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt, net	$	4,429	$	3,882
Accounts payable	22,464		23,151
Wire transfers and money orders payable, net	74,444		56,066
Accrued and other liabilities	32,223		33,760
Total current liabilities	133,560		116,859
Long-term liabilities:
Debt, net	118,753		79,211
Lease liabilities, net	1,525		—
Deferred tax liability, net	50		1,426
Total long-term liabilities	120,328		80,637

Commitments and contingencies, see Note 15

Stockholders’ equity:
Common stock $0.0001 par value; 230,000,000 shares authorized, 39,417,077 and 38,820,222 shares issued and 37,059,940 and 38,478,700 shares outstanding as of September 30, 2022 and December 31, 2021, respectively.	4		4
Additional paid-in capital	68,457		66,875
Retained earnings	126,067		81,803
Accumulated other comprehensive loss	(215)		(76)
Treasury stock, at cost; 2,357,137 and 341,522 shares as of September 30, 2022 and December 31, 2021, respectively.	(49,300)		(5,566)
Total stockholders’ equity	145,013		143,040
Total liabilities and stockholders’ equity	$	398,901	$	340,536

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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INTERNATIONAL MONEY EXPRESS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(in thousands, except for share data, unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues:
Wire transfer and money order fees, net	$	120,718	$	104,191	$	336,340	$	284,409
Foreign exchange gain, net	18,851		15,643		52,719		45,347
Other income	1,198		873		3,309		2,275
Total revenues	140,767		120,707		392,368		332,031

Operating expenses:
Service charges from agents and banks	93,658		81,416		262,717		222,654
Salaries and benefits	13,853		10,859		36,911		30,909
Other selling, general and administrative expenses	10,232		9,966		24,964		22,549
Depreciation and amortization	2,278		2,362		6,712		7,041
Total operating expenses	120,021		104,603		331,304		283,153

Operating income	20,746		16,104		61,064		48,878

Interest expense	1,466		968		3,530		3,562

Income before income taxes	19,280		15,136		57,534		45,316

Income tax provision	2,654		3,629		13,270		11,605

Net income	16,626		11,507		44,264		33,711

Other comprehensive loss	(150)		(151)		(139)		(139)

Comprehensive income	$	16,476	$	11,356	$	44,125	$	33,572

Earnings per common share:
Basic	$	0.44	$	0.30	$	1.16	$	0.88
Diluted	$	0.43	$	0.29	$	1.14	$	0.86

Weighted-average common shares outstanding:
Basic	37,390,632		38,647,931		37,999,709		38,441,767
Diluted	38,425,868		39,336,051		38,907,283		39,071,622

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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INTERNATIONAL MONEY EXPRESS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except for share data, unaudited)


	Three Months Ended September 30, 2022
	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balance, June 30, 2022	39,011,042	$	4	(1,069,423)	$	(19,194)	$	70,012	$	109,441	$	(65)	$	160,198
Net income	—	—		—	—		—		16,626		—		16,626
Issuance of common stock:
Exercise of stock options, net of shares withheld for taxes	377,589	—		—	—		(4,162)		—		—		(4,162)
Restricted stock units and awards, net of shares withheld for taxes	27,664	—		—	—		(18)		—		—		(18)
Fully vested shares	782	—		—	—		—		—		—		—
Share-based compensation	—	—		—	—		2,625		—		—		2,625
Adjustment from foreign currency translation, net	—	—		—	—		—		—		(150)		(150)
Acquisition of treasury stock, at cost	—	—		(1,287,714)	(30,106)		—		—		—		(30,106)
Balance, September 30, 2022	39,417,077	$	4	(2,357,137)	$	(49,300)	$	68,457	$	126,067	$	(215)	$	145,013


	Three Months Ended September 30, 2021
	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balance, June 30, 2021	38,585,724	$	4	—	$	—	$	64,009	$	57,164	$	(1)	$	121,176
Net income	—	—		—	—		—		11,507		—		11,507
Issuance of common stock:
Exercise of stock options	152,678	—		—	—		(85)		—		—		(85)
Restricted stock units and awards	—	—		—	—		—		—		—		—
Fully vested shares	1,078	—		—	—		—		—		—		—
Share-based compensation	—	—		—	—		1,112		—		—		1,112
Adjustment from foreign currency translation, net	—	—		—	—		—		—		(151)		(151)
Acquisition of treasury stock, at cost	—	—		(70,440)	(1,205)		—		—		—		(1,205)
Balance, September 30, 2021	38,739,480	$	4	(70,440)	$	(1,205)	$	65,036	$	68,671	$	(152)	$	132,354

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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INTERNATIONAL MONEY EXPRESS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (CONTINUED)

(in thousands, except for share data, unaudited)


	Nine Months Ended September 30, 2022
	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balance, December 31, 2021	38,820,222	$	4	(341,522)	$	(5,566)	$	66,875	$	81,803	$	(76)	$	143,040
Net income	—	—		—	—		—		44,264		—		44,264
Issuance of common stock:
Exercise of stock options, net of shares withheld for taxes	451,304	—		—	—		(3,675)		—		—		(3,675)
Restricted stock units and awards, net of shares withheld for taxes	142,991	—		—	—		(301)		—		—		(301)
Fully vested shares	2,560	—		—	—		—		—		—		—
Share-based compensation	—	—		—	—		5,558		—		—		5,558
Adjustment from foreign currency translation, net	—	—		—	—		—		—		(139)		(139)
Acquisition of treasury stock, at cost	—	—		(2,015,615)	(43,734)		—		—		—		(43,734)
Balance, September 30, 2022	39,417,077	$	4	(2,357,137)	$	(49,300)	$	68,457	$	126,067	$	(215)	$	145,013


	Nine Months Ended September 30, 2021
	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balance, December 31, 2020	38,217,125	$	4	—	—		$	59,310	$	34,960	$	(13)	$	94,261
Net income	—	—		—	—		—		33,711		—		33,711
Issuance of common stock:
Exercise of stock options	397,585	—		—	—		2,344		—		—		2,344
Restricted stock units and awards, net of shares withheld for taxes	121,596	—		—	—		—		—		—		—
Fully vested shares	3,174	—		—	—		—		—		—		—
Share-based compensation	—	—		—	—		3,382		—		—		3,382
Adjustment from foreign currency translation, net	—	—		—	—		—		—		(139)		(139)
Acquisition of treasury stock, at cost	—	—		(70,440)	(1,205)		—		—		—		(1,205)
Balance, September 30, 2021	38,739,480	$	4	(70,440)	$	(1,205)	$	65,036	$	68,671	$	(152)	$	132,354

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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INTERNATIONAL MONEY EXPRESS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net income	$	44,264	$	33,711
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	6,712		7,041
Share-based compensation	5,558		3,382
Provision for credit losses	2,022		1,009
Debt origination costs amortization	752		626
Deferred income tax (benefit) provision, net	(1,376)		673
Non-cash lease expense	1,631		—
Loss on disposal of property and equipment	633		1,311
Total adjustments	15,932		14,042
Changes in operating assets and liabilities:
Accounts receivable, net	(34,864)		(43,402)
Prepaid wires, net	(47,099)		38,561
Prepaid expenses and other assets	(828)		(6,210)
Wire transfers and money orders payable, net	18,158		18,136
Lease liabilities	(2,013)		—
Accounts payable and accrued and other liabilities	(3,398)		5,867
Net cash (used in) provided by operating activities	(9,848)		60,705

Cash flows from investing activities:
Purchases of property and equipment	(9,155)		(5,523)
Acquisition of agent locations	(225)		—
Net cash used in investing activities	(9,380)		(5,523)

Cash flows from financing activities:
Repayments of term loan facility	(3,281)		(43,135)
Borrowings under revolving credit facility, net	43,000		—
Borrowings under term loan facility	—		40,158
Debt origination costs	—		(2,894)
Proceeds from exercise of stock options	1,374		3,192
Payments for stock awards	(5,349)		(849)
Repurchases of common stock	(43,734)		(1,205)
Net cash used in financing activities	(7,990)		(4,733)

Effect of exchange rate changes on cash	(204)		(224)

Net (decrease) increase in cash	(27,422)		50,225

Cash, beginning of period	132,474		74,907

Cash, end of period	$	105,052	$	125,132

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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INTERNATIONAL MONEY EXPRESS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(in thousands, unaudited)


	Nine Months Ended September 30,
	2022		2021
Supplemental disclosure of cash flow information:
Cash paid for interest	$	2,773	$	2,940
Cash paid for income taxes	$	19,692	$	12,567
Issuance of common stock for cashless exercise of options	$	9,175	$	2,973
Non-cash lease liabilities arising from obtaining right-of-use assets	$	6,033	$	—
Right-of-use asset adjustments due to lease modifications	$	1,124	$	—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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INTERNATIONAL MONEY EXPRESS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – BUSINESS AND ACCOUNTING POLICIES

International Money Express, Inc. (the “Company” or “us” or “we”) operates as a money transmitter between the United States of America (“United States” or “U.S.”) and Canada to Mexico, Guatemala and other countries in Latin America, Africa and Asia through a network of authorized agents located in various unaffiliated retail establishments and 37 Company-operated stores throughout the United States and Canada.

The coronavirus (“COVID-19”) pandemic that started in 2020 has had and continues to have a significant effect on economic conditions in the United States, and continues to cause significant uncertainties in the U.S. and global economies, particularly as a result of the emergence of new variants and sub-variants of COVID-19. Public health officials and medical professionals have warned that COVID-19 resurgences may continue to occur due to a variety of factors, including the extent of economic activity, social interaction, vaccination rates and the emergence of potent variants. It is unclear if and when resurgences will occur or how long any resurgence will last, how severe it will be, and what safety measures governments and businesses will impose in response.

The Company’s operations have continued effectively despite measures taken in response to the pandemic. However, the ultimate impact of the COVID-19 pandemic and any potential material adverse effect on the Company’s condition, results of operations and cash flows is dependent on future developments, including the duration or resurgence of the pandemic and the related extent of its severity, as well as its impact on the economic conditions, particularly the level of unemployment of our consumers, inflation (including changes in wages) and governmental efforts to restrain inflation, interest rate levels and foreign exchange volatility, all of which remain uncertain and cannot be predicted at this time.

The condensed consolidated financial statements of the Company include International Money Express, Inc. and its majority-owned subsidiaries. The condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). All significant inter-company balances and transactions have been eliminated from the condensed consolidated financial statements.

The Company’s interim condensed consolidated financial statements and related notes are unaudited. In the opinion of management, all adjustments (including normal recurring adjustments) and disclosures necessary for a fair presentation of these interim condensed consolidated financial statements have been included. The results reported in these interim condensed consolidated financial statements are not necessarily indicative of the results that may be reported for the entire year. Certain information and footnote disclosures required by GAAP have been condensed or omitted. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

On March 16, 2022, the Company entered into a definitive purchase agreement to acquire Envios de Valores La Nacional Corp. (“La Nacional”) and LAN Holdings, Corp. (“LAN Holdings”), which either directly or indirectly operate as money remittance companies in the United States, Canada and certain countries in Europe. On November 1, 2022, the Company entered into an Amended and Restated Stock Purchase Agreement to allow the parties to close on the acquisition of La Nacional effective November 1, 2022 and to close on the acquisition of LAN Holdings at a later date following receipt of pending regulatory approvals. The acquisition of LAN Holdings is expected to close late in the fourth quarter of 2022 or early 2023. The Company paid $42.3 million upon consummation of the acquisition of La Nacional (subject to customary purchase price adjustments) and anticipates up to an additional $2.4 million in contingent consideration to be paid in 2023 if La Nacional achieves certain financial targets and operational milestones. For LAN Holdings, the Company expects to pay cash of approximately $7.7 million (subject to customary purchase price adjustments) and up to an additional $0.6 million in contingent consideration in 2023 if LAN Holdings achieves certain financial targets and operational milestones. Refer to Note 16 for additional information on the closing of the acquisition of La Nacional.

Accounting Pronouncements

On January 1, 2022, the Company adopted the new accounting guidance, Leases (Topic 842) (“ASC 842”), which required the Company to record assets and liabilities on the balance sheet for lease-related rights and obligations and disclose key information about its leasing arrangements. The guidance requires that a lessee recognizes a liability to make lease payments (the lease liability) and a right-of-use (“ROU”) asset representing its right to use the underlying asset for the lease term on the balance sheet. Leases are classified as financing or operating, with classification affecting the pattern of expense recognition in the condensed consolidated statements of income and comprehensive income. Refer to Note 6 for additional information on the adoption of this standard and related disclosures.

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The FASB issued guidance, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, regarding the measurement of credit losses for certain financial instruments. The new standard replaces the incurred loss model with a current expected credit loss (“CECL”) model. The CECL model is based on historical experience, adjusted for current conditions and reasonable and supportable forecasts. The Company is in the process of implementing the CECL model and is updating certain of its business processes and internal controls to meet the reporting and disclosure requirement of the new accounting guidance. The new guidance, which the Company will adopt effective on December 31, 2022 using the modified-retrospective approach, is not expected to materially affect the amount of provision for credit losses recognized under the Company’s current model and is not expected to have a material effect on the Company’s consolidated financial statements.

NOTE 2 – REVENUES

The Company recognized revenues from contracts with customers for the three and nine months ended September 30, 2022 and 2021, as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Wire transfer and money order fees	$	121,218	$	104,543	$	337,757	$	285,430
Discounts and promotions	(500)		(352)		(1,417)		(1,021)
Wire transfer and money order fees, net	120,718		104,191		336,340		284,409
Foreign exchange gain, net	18,851		15,643		52,719		45,347
Other income	1,198		873		3,309		2,275
Total revenues	$	140,767	$	120,707	$	392,368	$	332,031

There are no significant initial costs incurred to obtain contracts with customers, although the Company has a loyalty program under which customers earn one point for each wire transfer completed. Points can be redeemed for a discounted wire transaction fee or a foreign exchange rate that is more favorable to the customer. The customer benefits vary by country, and the earned points expire if the customer has not initiated and completed an eligible wire transfer transaction within the immediately preceding 180-day period. In addition, earned points will expire 30 days after the end of the program. Because the loyalty program benefits represent a future performance obligation, a portion of the initial consideration is recorded as deferred revenue loyalty program (see Note 8) and a corresponding loyalty program expense is recorded as contra revenue. Revenue from this performance obligation is recognized upon customers redeeming points or upon expiration of any points outstanding.

Except for the loyalty program discussed above, our revenues include only one performance obligation, which is to collect the consumer’s money and make funds available for payment, generally on the same day, to a designated recipient in the currency requested.

The Company also offers several other services, including money orders and check cashing through its sending agents, for which revenue is derived from a fee per transaction. For substantially all of the Company’s revenues, the Company acts as principal in the transaction and reports revenue on a gross basis because the Company controls the service at all times prior to transfer to the customer, is primarily responsible for fulfilling the customer contracts, has the risk of loss and has the ability to establish transaction prices.

NOTE 3 – ACCOUNTS RECEIVABLE AND AGENT ADVANCES RECEIVABLE, NET OF ALLOWANCE

Accounts Receivable

Accounts receivable represents outstanding balances from sending agents for pending wire transfers or money orders from consumers. The outstanding balance of accounts receivable, net of allowance for credit losses, consists of the following (in thousands):


	September 30, 2022		December 31, 2021
Accounts receivable	$	102,363	$	69,498
Allowance for credit losses	(2,302)		(2,181)
Accounts receivable, net	$	100,061	$	67,317

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Agent Advances Receivable

The Company had agent advances receivable, net of allowance for credit losses, from sending agents as follows (in thousands):


	September 30, 2022		December 31, 2021
Agent advances receivable, current	$	1,532	$	791
Allowance for credit losses	(58)		(55)
Net current	$	1,474	$	736

Agent advances receivable, long-term	$	1,422	$	656
Allowance for credit losses	(24)		(13)
Net long-term	$	1,398	$	643

The net current portion of agent advances receivable is included in prepaid expenses and other current assets (see Note 4), and the net long-term portion is included in other assets in the condensed consolidated balance sheets. Agent advances receivable have interest rates ranging from 0% to 15.0% per annum. At September 30, 2022 and December 31, 2021, there were $3.0 million and $1.4 million, respectively, of agent advances receivable collateralized by personal guarantees from sending agents and assets from their businesses in case of a default by the agent.

The maturities of agent advances receivable at September 30, 2022 are as follows (in thousands):


	Unpaid Advance Balance
Under 1 year	$	1,532
Between 1 and 2 years	1,249
More than 2 years	173
Total	$	2,954

Allowance for Credit Losses

The changes in the allowance for credit losses related to accounts receivable and agent advances receivable are as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Beginning balance	$	2,442	$	2,028	$	2,249	$	2,042
Provision	525		342		2,022		1,009
Charge-offs	(700)		(361)		(2,202)		(1,249)
Recoveries	117		197		315		404
Ending Balance	$	2,384	$	2,206	$	2,384	$	2,206

The allowance for credit losses allocated by financial instrument category is as follows (in thousands):


	September 30, 2022		December 31, 2021
Accounts receivable	$	2,302	$	2,181
Agent advances receivable	82		68
Allowance for credit losses	$	2,384	$	2,249

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NOTE 4 – PREPAID EXPENSES AND OTHER ASSETS

Prepaid expenses and other current assets consisted of the following (in thousands):


	September 30, 2022		December 31, 2021
Prepaid insurance	$	1,118	$	923
Prepaid fees and services	1,739		1,930
Agent incentives advances	914		815
Agent advances receivable, net of allowance	1,474		736
Assets pending settlement	248		331
Prepaid income taxes	2,940		1,563
Prepaid expenses and current assets - other	473		690
	$	8,906	$	6,988

Other assets consisted of the following (in thousands):


	September 30, 2022		December 31, 2021
Revolving line origination fees	$	1,650	$	2,032
Agent incentives advances	828		1,010
Agent advances receivable, net of allowance	1,398		643
Right-of-use assets, net	3,186		—
Funds held by seized banking entities, net of allowance	1,584		3,114
Other assets	649		635
	$	9,295	$	7,434

During September 2021, local banking regulators in Mexico resolved to close and liquidate a local financial institution, citing a lack of compliance with minimum capital requirements. The Company has approximately $5.2 million of exposure from deposits it held with this bank when it was closed. In accordance with the banking regulations in Mexico, large depositors such as the Company will be paid once the assets of the financial institution are liquidated. Currently, it is difficult to predict the length of the liquidation process or if the proceeds from the asset liquidation will be sufficient to recover a portion or all of its funds on deposit. As a result of management’s reassessment of the current status of the liquidation process, which has been delayed in the court system in Mexico, during the three months ended September 30, 2022, the Company recorded an additional provision of $1.6 million; consequently, the Company maintains a valuation allowance of approximately $3.6 million in connection with the balance of deposits held by the financial institution as a result of its closure.

NOTE 5 – GOODWILL AND INTANGIBLE ASSETS

Goodwill and the majority of intangible assets on the condensed consolidated balance sheets of the Company were recognized from a prior acquisition. Intangible assets on the condensed consolidated balance sheets of the Company consist of agent relationships, trade name, developed technology and other intangible assets. Agent relationships, trade name and developed technology are all amortized over 15 years using an accelerated method that correlates with the projected realization of the benefit. The agent relationships intangible represents the network of independent sending agents; trade name refers to the Intermex name, branded on all agent locations and well recognized in the market; and developed technology includes the state-of-the-art system that the Company has continued to develop and improve over the past 20 years. Other intangible assets relate to the acquisition of Company-operated stores, which are amortized on a straight line basis over 10 years. The determination of our intangible fair values includes several assumptions that are subject to various risks and uncertainties. Management believes it has made reasonable estimates and judgments concerning these risks and uncertainties, and no impairment charges were determined necessary to be recognized during the three and nine months ended September 30, 2022.

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The following table presents the changes in goodwill and intangible assets (in thousands):


	Goodwill		Intangibles
Balance at December 31, 2021	$	36,260	$	15,392
Acquisition of agent locations	—		225
Amortization expense	—		(3,018)
Balance at September 30, 2022	$	36,260	$	12,599

Amortization expense related to intangible assets for the remainder of 2022 and thereafter is as follows (in thousands):


2022	$	1,008
2023	3,024
2024	2,305
2025	1,752
2026	1,332
Thereafter	3,178
	$	12,599

NOTE 6 – LEASES

To conduct certain of our operations, the Company is a party to leases for office space, warehouses and Company-operated store locations. Our leases have remaining terms of up to 8.9 years, some of which include options to renew and extend the lease. We presently intend to exercise certain of the extension options available to us and for purposes of computing the right-of-use assets and lease liabilities required by ASC 842, we have incorporated the options to renew that are reasonably certain of exercise by us.

The Company adopted ASC 842, including related amendments, effective January 1, 2022, using the modified retrospective approach and used the effective date as the date of initial application; therefore comparative periods were not adjusted. The Company determined that all of its leasing arrangements are classified as operating leases. The Company elected to apply the practical expedients to (i) not reassess its prior conclusions about lease identification, lease classification and initial direct costs and (ii) use hindsight in determining the lease term. In addition, the Company elected not to separate lease and non-lease components for all arrangements where the Company is a lessee. Adoption of the new standard resulted in the recording of additional right-of-use assets and lease liabilities of approximately $5.6 million as of January 1, 2022. The adoption of ASC 842 did not materially impact the Company’s consolidated net income and had no impact on cash flows. Additionally, there was no cumulative effect of adoption recognized on retained earnings in the condensed consolidated statement of changes in stockholders’ equity.

The presentation of right-of-use assets and lease liabilities in the condensed consolidated balance sheet is as follows (in thousands):

Leases

Classification

September 30, 2022

Assets

Right-of-use assets

Other assets(1)

3,186

Total leased assets

3,186

Liabilities

Current

Operating

Accrued and other liabilities

1,273

Noncurrent

Operating

Lease liabilities

1,525

Total Lease liabilities

2,798

(1) Operating right of-use assets are recorded net of accumulated amortization of $1.5 million as of September 30, 2022.

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Lease expense for the three and nine months ended September 30, 2022, was as follows (in thousands):

Three Months Ended

Nine Months Ended

Lease Cost

Classification

September 30, 2022

Operating lease cost

Other selling, general and administrative expenses

632

1,631

Rent expense for the three and nine months ended September 30, 2021 was $0.6 million and $1.8 million, respectively, which is included in other selling, general and administrative expenses in the condensed consolidated statements of income and comprehensive income.

As of September 30, 2022, the Company’s weighted-average remaining lease terms on its operating leases is 2.5 years, and the Company’s weighted-average discount rate is 2.84%, which is the Company’s incremental borrowing rate. The Company used its incremental borrowing rate for all leases, as none of the Company’s lease agreements provide a readily determinable implicit rate.

Lease Payments

Future minimum lease payments for assets under non-cancelable operating lease agreements with original terms of more than one year for the remainder of 2022 and thereafter are as follows (in thousands):


2022	$	430
2023	996
2024	519
2025	411
2026	277
Thereafter	312
Total lease payments	2,945
Less: Imputed interest	(147)
Present value of lease liabilities	$	2,798

NOTE 7 – WIRE TRANSFERS AND MONEY ORDERS PAYABLE, NET

Wire transfers and money orders payable, net consisted of the following (in thousands):


	September 30, 2022		December 31, 2021
Wire transfers payable, net	$	33,981	$	20,744
Customer voided wires payable	20,654		16,895
Money orders payable	19,809		18,427
	$	74,444	$	56,066

Customer voided wires payable consist primarily of wire transfers that were not completed because the recipient did not collect the funds within 30 days and the sender has not claimed the funds and, therefore, are considered unclaimed property. Unclaimed property laws of each state in the United States in which we operate, the District of Columbia, and Puerto Rico require us to track certain information for all of our money remittances and payment instruments and, if the funds underlying such remittances and instruments are unclaimed at the end of an applicable statutory abandonment period, require us to remit the proceeds of the unclaimed property to the appropriate jurisdiction. Applicable statutory abandonment periods range from three to seven years.

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NOTE 8 – ACCRUED AND OTHER LIABILITIES

Accrued and other liabilities consisted of the following (in thousands):


	September 30, 2022		December 31, 2021
Commissions payable to sending agents	$	17,243	$	16,303
Accrued salaries and benefits	4,200		4,892
Accrued bank charges	1,412		1,371
Accrued legal fees	176		422
Accrued other professional fees	1,316		1,619
Accrued taxes	1,355		4,908
Lease liabilities, current portion	1,273		—
Deferred revenue loyalty program	4,090		3,391
Other	1,158		854
	$	32,223	$	33,760

The following table shows the changes in the deferred revenue loyalty program liability (in thousands):


Balance, December 31, 2021	$	3,391
Revenue deferred during the period	2,184
Revenue recognized during the period	(1,485)
Balance, September 30, 2022	$	4,090

NOTE 9 – DEBT

Debt consisted of the following (in thousands):


	September 30, 2022		December 31, 2021
Revolving credit facility	$	43,000	$	—
Term loan facility	82,031		85,313
	125,031		85,313
Less: Current portion of long-term debt (1)	(4,429)		(3,882)
Less: Debt origination costs	(1,849)		(2,220)
	$	118,753	$	79,211

(1)Current portion of long-term debt is net of debt origination costs of approximately $0.5 million both at September 30, 2022 and December 31, 2021.

On June 24, 2021, the Company and certain of its domestic subsidiaries as borrowers and the other guarantors from time to time party thereto (collectively, the “Loan Parties”) entered into an Amended and Restated Credit Agreement (the “A&R Credit Agreement”) with a group of banking institutions. The A&R Credit Agreement amended and restated in its entirety the Company’s previous credit agreement. The A&R Credit Agreement provides for a $150.0 million revolving credit facility, an $87.5 million term loan facility and an uncommitted incremental facility, which may be utilized for additional revolving or term loans, of up to $70.0 million. The A&R Credit Agreement also provides for the issuance of letters of credit, which would reduce availability under the revolving credit facility. The proceeds of the term loan were used to refinance the existing term loan facility under the Company’s previous credit agreement, and the revolving credit facility is available for working capital, general corporate purposes and to pay fees and expenses in connection with this transaction. The maturity date of the A&R Credit Agreement is June 24, 2026.

This refinancing was accounted for as a debt modification. The balance of the unamortized debt origination costs of $1.8 million under the Company’s previous credit agreement, the origination costs paid to the Loan Parties of $1.0 million in connection with the term loan facility of the A&R Credit Agreement and debt origination costs paid to the Loan Parties and third-party costs of $1.8 million incurred in connection with the revolving credit facility of the A&R Credit Agreement will be associated with the new arrangement, and therefore, they will be amortized over the remaining life of the A&R Credit Agreement using the straight-line method, as it is not significantly different than the effective interest method. Debt origination costs paid to third parties related to a portion of the term loan facility in connection with the A&R Credit Agreement were expensed as incurred during the second quarter of 2021.

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The unamortized portion of debt origination costs totaled approximately $3.5 million and $4.5 million at September 30, 2022 and December 31, 2021, respectively. Amortization of debt origination costs is included as a component of interest expense in the condensed consolidated statements of income and comprehensive income and amounted to approximately $0.2 million for both the three months ended September 30, 2022 and 2021, and $0.8 million and $0.6 million for the nine months ended September 30, 2022 and 2021, respectively.

At the election of the Company, interest on the term loan facility and revolving credit facility under the A&R Credit Agreement is determined by reference to either LIBOR (subject to replacement) or a “base rate”, in each case plus an applicable margin ranging between 2.50% and 3.00% per annum for LIBOR loans and between 1.50% and 2.00% per annum for base rate loans depending on the level of our consolidated leverage ratio, as calculated pursuant to the terms of the A&R Credit Agreement. The Company is also required to pay a fee on the unused portion of the revolving credit facility equal to 0.35% per annum. The effective interest rates for the nine months ended September 30, 2022 for the term loan facility and revolving credit facility were 4.18% and 0.80%, respectively.

Interest is payable (x)(i) generally on the last day of each interest period selected for LIBOR loans, but in any event, not less frequently than every three months, and (ii) on the last business day of each quarter for base rate loans and (y) at final maturity. The principal amount of the term loan facility under the A&R Credit Agreement must be repaid in consecutive quarterly installments of 5.0% in years 1 and 2, 7.5% in year 3, and 10.0% in years 4 and 5, in each case on the last day of each quarter, commencing in September 2021 with a final balloon payment at maturity. The term loans under the A&R Credit Agreement may be prepaid at any time without premium or penalty. Revolving loans may be borrowed, repaid and reborrowed from time to time in accordance with the terms and conditions of the A&R Credit Agreement. The Company is also required to repay the loans upon receipt of net proceeds from certain casualty events, upon the disposition of certain property and upon incurrence of indebtedness not permitted by the A&R Credit Agreement. In addition, the Company is required to make mandatory prepayments annually from excess cash flow if the Company’s consolidated leverage ratio (as calculated under the A&R Credit Agreement) is greater than or equal to 3.0, and the remainder of any such excess cash flow is contributed to the available amount which may be used for a variety of purposes, including investments and distributions.

The A&R Credit Agreement contains financial covenants that require the Company to maintain a quarterly minimum fixed charge coverage ratio of 1.25:1.00 and a quarterly maximum consolidated leverage ratio of 3.25:1.00. The A&R Credit Agreement also contains covenants that limit the Company’s and its subsidiaries’ ability to, among other things, grant liens, incur additional indebtedness, make acquisitions or investments, dispose of certain assets, change the nature of their businesses, enter into certain transactions with affiliates or amend the terms of material indebtedness.

In addition, the A&R Credit Agreement generally restricts the payment of dividends or cash distributions by the Company with certain exceptions, including the following: i) to repurchase the Company’s common stock from current or former employees in an aggregate amount of up to $10.0 million per calendar year, and ii) other restricted payments in an aggregate amount not to exceed $40.0 million plus the Available Amount (as defined in the A&R Credit Agreement). Through September 30, 2022 and as described in Note 12, the Company funded repurchases of shares of the Company’s common stock in an aggregate amount of $40.0 million plus the Available Amount.

The obligations under the A&R Credit Agreement are guaranteed by the Company and certain domestic subsidiaries of the Company and secured by liens on substantially all of the assets of the Loan Parties, subject to certain exclusions and limitations.

NOTE 10 – FAIR VALUE MEASUREMENTS

The Company determines fair value in accordance with the provisions of FASB guidance, Fair Value Measurements and Disclosures, which defines fair value as an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-level fair value hierarchy that prioritizes the inputs used to measure fair value was established. There are three levels of inputs used to measure fair value and for disclosure purposes. Level 1 relates to quoted market prices for identical assets or liabilities in active markets. Level 2 relates to observable inputs other than quoted prices included in Level 1. Level 3 relates to unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s non-financial assets measured at fair value on a nonrecurring basis include goodwill and intangible assets. All other financial assets and liabilities are carried at amortized cost.

The Company’s cash balances are representative of their fair values as these balances are comprised of deposits available on demand. The carrying amounts of accounts receivable, prepaid wires, accounts payable and wire transfers and money orders payable are representative of their fair values because of the short turnover of these instruments.

The Company’s financial liabilities include its revolving credit facility and term loan facility. The fair value of the term loan facility, which approximates book value, is estimated by discounting the future cash flows using a current market interest rate. The estimated fair value of

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the revolving credit facility would approximate face value given the payment schedule and interest rate structure, which approximates current market interest rates.

NOTE 11 – SHARE-BASED COMPENSATION

International Money Express, Inc. Omnibus Equity Compensation Plans

The International Money Express, Inc. 2020 Omnibus Equity Compensation Plan (the “2020 Plan”) provides for the granting of stock-based incentive awards, including stock options, restricted stock units (“RSUs”), restricted stock awards (“RSAs”) and performance stock units (“PSUs”) to employees and independent directors of the Company. There are 3.7 million shares of the Company’s common stock approved for issuance under the 2020 Plan, which includes 0.4 million shares that were previously subject to awards granted under the International Money Express, Inc. 2018 Omnibus Equity Compensation Plan (the “2018 Plan” and together with the 2020 Plan, the “Plans”). Although awards remain outstanding under the 2018 Plan, which was terminated effective June 26, 2020, no additional awards may be granted under the 2018 Plan. As of September 30, 2022, 2.6 million shares remained available for future awards under the 2020 Plan.

Stock Options

The value of each option grant is estimated on the grant date using the Black-Scholes option pricing model (“BSM”). The option pricing model requires the input of subjective assumptions, including the grant date fair value of our common stock, expected volatility, risk-free interest rates, expected term and expected dividend yield. To determine the grant date fair value of the Company’s common stock, we use the closing market price of our common stock at the grant date. We also use an expected volatility based on the historical volatility of the Company’s common stock and the “simplified” method for calculating the expected life of our stock options as the options are “plain vanilla” and we do not have any significant historical post-vesting activity. We have elected to account for forfeitures as they occur. The risk-free interest rates are obtained from publicly available U.S. Treasury yield curve rates.

Share-based compensation is recognized as an expense on a straight-line basis over the requisite service period, which is generally the vesting period. The stock options issued under the Plans have 10-year terms and generally vest in four equal annual installments beginning one year after the date of the grant. The Company recognized compensation expense for stock options of approximately $0.1 million and $0.5 million for the three months ended September 30, 2022 and 2021, respectively, and $1.2 million and $1.8 million for the nine months ended September 30, 2022 and 2021, respectively, which are included in salaries and benefits in the condensed consolidated statements of income and comprehensive income. As of September 30, 2022, unrecognized compensation expense related to stock options of approximately $0.9 million is expected to be recognized over a weighted-average period of